Modern Auditing 1st Edition Graham Cosserat - Solutions

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Loss of which of the following files is likely to have the most serious consequences for a manufacturing organization:a. Inventory fileb. Material requirements planning filec. Job routing filed. Bill-of-materials file
Computer abuse is best defined as:a. Malicious damage carried out to hardware and softwareb. Any incident associated with computer technology whereby a victim suffered loss and a perpetrator gainedc. A fraud perpetrated by modifying software or hardwared. Any incident whereby a hacker breaches
Relative to general fraud and embezzlement, computer fraud and embezzlement seems to be:a. Unaffected by deterrent administrative controlsb. Smaller in sizec. Larger in sized. Easier to prosecute via the law
The evolution of technology needs to be controlled because:a. Using new technology always has undesirable consequences unless it is controlledb. It tends to increase the monopolistic power of those companies that can afford to purchase the technologyc. Though computer technology is neutral, its use
From an information systems audit perspective, which of the following is the most valuable asset in an information systems facility:a. Hardwareb. Databasec. Personneld. Software
Which of the following information systems audit objectives requires that information systems auditors be concerned about the possibility of proprietary software being stolen:a. Achieving system effectivenessb. Preserving data integrityc. Achieving system efficiencyd. Safeguarding assets
An effective data processing system:a. Satisfactorily accomplishes the objectives of its usersb. Maintains data integrity as its primary objectivec. Is the most efficient system that can be implementedd. Has asset safeguarding as its primary objective
In a computer-based information system, separation of duties:a. Can always be attained in the same way as in a manual systemb. Might have to be implemented in different forms compared with manual systemsc. Is less important than in a manual system because programs make fewer errors than clerksd.
Compared with a manual system, the consequences of error in a computer system often are more serious because:a. Errors in computer systems tend to be stochastic Cmanual areb. Computer systems process more data than manual systems sto hastro)c. Errors in computer systems are generated at high speed,
Compared with a manual system, in a computer system:a. Basic internal control objectives changeb. The methodologies for implementing controls changec. Control objectives are more difficult to achieved. Internal control principles change
Clear lines of authority and responsibility are sometimes difficult to achieve in a computer system because:a. Resources are shared and ownership is sometimes difficult to assignb. Duties constantly change as a result of the rapid evolution of technologyc. Information systems personnel are not
Which of the following statements about information systems personnel is false:a. Historically, information systems personnel have been in short supplyb. Information systems personnel have lacked a well-developed system of ethicsc. Information systems personnel often perform tasks that are
In a computer system, it is often difficult to evaluate the system of general authorizations because general authorizations have been:a. Dispersed to more usersb. Combined with specific authorizationsc. Embedded in computer programsd. Displaced by system software controls
In a computer system, the audit trail is:a. Still always present in some type of hard-copy formb. Disappearing as more online, realtime update systems are usedc. Produced automatically by software during the update processd. Sometimes more extensive than the audit trail in manual systems if it is
Compared with a manual system, the assets and records in a computer-based information system tend to be:a. More concentrated at a single locationb. Dispersed across many more locationsc. Concentrated to about the same extentd. More concentrated at different locations but less valuable
Compared with a manual system, supervision of employee activities in a computer-based information system is:a. Easier, because observation and inquiry of employee activities is easierb. Harder, because many activities are performed electronically and remotelyc. Easier, because unauthorized
In a computer system, independent checks on performance are often unnecessary because a procedure is performed by a computer program. Similarly, computer programs rather than independent staff often prepare reports that compare data and assets for accountability purposes. As a result, which of the
Which of the following has not been an effect of computer-based information systems on auditing:a. Evidence collection tends to be harder to carry outb. Understanding the control technology tends to be harderc. It is often harder to trace the effects of a control weaknessd. The fundamental
A major contribution of computer science to the discipline of information systems auditing has been:a. Insights into how generalized audit software should be developedb. An understanding of why behavioral problems occur with information systems implementationc. An understanding of how project
What persons and skills are normally assigned to a "full-service" audit team?
What is the primary benefit for auditors' preliminary assessment of materiality as a matter of audit planning?
What are the general characteristics of transactions that are typically computerized? Typically not computerized?
What are some other important differences between manual and computer accounting systems?
In addition to the planning matters considered in a manual accounting system, what additional ones should be considered when computer processing is involved?
What are computer assisted audit tools and techniques (CAATTS)?
What audit tasks can be accomplished with word processing software? Spreadsheet software?
Which of the following matchups of types of analytical procedures and sources of information makes the most sense? Type of Analytical Procedure a Comparison of current account balances with prior periods b. Comparison of current account balances with expected balances Evaluation of current account
How do these standards differ for (1) errors, (2) frauds, (3) direct-effect illegal acts, and (4) far-removed-effect illegal acts?
Two kinds of audit programs have been identified. What are they? What is the objective of each?
Are analytical procedures very effective for discovering errors and frauds?
Audit Programs on the Internet. Auditnet (www.auditnet.org) is a website that provides support for practicing internal and external auditors. One of its resources is Auditors Sharing Audit Programs (ASAP), a library of audit programs for a number of different audit areas. If you need an audit
What conditions create demand for useful information?
What is an attest engagement?
What are the practice standards, and who issues them for independent auditors of financial statements? governmental auditors? internal auditors? fraud auditors? auditing firms? auditors in other countries?
For what reasons does an auditor obtain an understanding of a client's internal control?
How does the source of evidence affect its competence?
What is the highest level of authoritative support for GAAP? the lowest level?
What is the purpose served by the attestation standards?
What are the major differences between the attestation standards and the generally accepted auditing standards?
Consider the following quality control policy and identify the quality control element to which it relates: "Designate individuals as specialists to serve as authoritative resources; provide procedures for resolving differences of opinion between audit personnel and specialists."
What roles are played by the Public Company Accounting Oversight Board (PCAOB) in connec- tion with the monitoring and regulation of CPA firms?
Which of the following is one of the four standards of reporting included in GAAS?a. Due professional care is to be exercised in the performance of the audit and the preparation of the report.b. The report shall state whether the financial statements are presented in accordance with GAAPc.
To exercise due professional care, a CPA shoulda. Take continuing professional education classes.b. Report whether the financial statements are in accordance with GAAP.c. Gather enough audit evidence to have complete assurance that there is enough support for the CPA's opinion on the financial
Auditors' reports on financial statements contain an opinion on the conformity of the statements with generally accepted accounting principles (GAAP). An audit decision on GAAP includes the determination of whether an accounting treatment is "generally accepted," and this determination is made by
Nancy Drew is the president of Mystery Capital Management, Inc. Mystery manages $$1.2$ billion in two mutual funds, one a stock fund and the other a bond fund. Competition for investors' money is fierce, and hundreds of money management companies compete by advertising their funds' performance
Quality Control Standards. Each of the following quality control policies and procedures are typical of ones that can be found in CPA firms' quality control documents. Identify each of them with one of the elements of quality control required by the AICPA Quality Control Standards.a. Review
Discuss the auditors’ reporting requirements (as outlined in SAS 600 (ISA 700)) after completing the audit fieldwork for an entity.
What does an unqualified audit opinion mean?
What are the three different types of qualified audit opinion? Discuss the circumstances that may cause these qualifications.
What is the effect of a fundamental uncertainty on the auditors’ report?
What are the principal effects of The Companies Act 1985 on the auditors’ report?
What are the audit requirements for reporting on consolidated financial statements?
Discuss the work that an auditor performing an initial engagement needs to perform on opening balances.
What is an auditor required to state on completion of the audit?(a) A statement of fact in relation to whether the financial statements represent a ‘true and fair’ view.(b) A detailed analysis of items the auditor has become aware of that have aroused his or her interest.(c) A statement of
If the auditor believes that management should disclose further information about directors’ remuneration but management does not agree to do this, what should the auditor do?(a) Report the breach to the appropriate regulatory authority and issue an ‘except for’ audit opinion.(b) Report the
Consider the following scenario. Restrictions imposed by the client prohibit the observation of stock-take, which accounts for about 40 per cent of all assets.Alternative audit procedures cannot be applied, although the auditor was able to obtain satisfactory evidence for all other items in the
In reviewing subsequent events, the auditor reviewed a number of sales transactions that raised serious concerns in relation to the recorded value of stocks. The auditor believes that stock should be written down by 15 per cent in the financial statements, but management is satisfied that stock is
The auditor has serious concerns about the going concern of the company. The company’s going concern is dependent on obtaining a large sales contract that is still under negotiation at the time of signing the auditors’ report. The management of the company has made full disclosure of this
The auditor concludes that there is a material inconsistency in the other information in an annual report to shareholders containing audited financial statements. If the auditor concludes that the financial statements do not require revision, but the directors refuse to revise or eliminate the
You have accepted an appointment to audit the financial statements of Hippo Ltd for the year ended 31 December 20X1. The financial statements of the company for the year ended 31 December 20X0 were unaudited. In relation to the opening balances in the 31 December 20X1 financial statements, you need
Assume that the following separate circumstances could be sufficiently material to require the expression of a qualified opinion.1. The company sacked its computer systems controller during the year. Before she left, she corrupted the system and, as a consequence, destroyed all financial
Fly-By-Night Ltd is a listed public company that manufactures highly sophisticated navigation equipment for defence force aircraft and Navy ships. The company has a 30 June 20X0 year-end, and the statutory accounts are due to be signed one week after the board of directors meeting on 5 August 20X0.
You are an audit partner currently finalising your 30 June 20X0 audits. The following independent and material matters have come to your attention:1. Food Fund (FF) is an unincorporated charity. As in prior years, you have performed the audit in accordance with its Articles of Association. The
Cornwall Ltd engaged Jane Thompson to perform its audit for the year ended 31 December 20X2. The financial statements for the previous year were audited by Frank Bassett who expressed an unqualified opinion.Jane Thompson’s audit working papers contain the following information that does not
An experienced (albeit elderly) audit partner was heard to make the following statement:‘I do not know why all this fuss is being made about audit trails when clients are implementing a new system. If advances in technology mean that there is less documentation, surely that must be a good thing.
Environmental auditing is becoming a more important issue in financial reporting and also in relation to auditing requirements. The British Standards Institution have developed a standard (BS 7750) that includes some guidance on environmental auditing.BS 7750 is a specification for an environmental
Your client is BigC Ltd, a large private firm with offices in all major cities of the UK. BigC specialises in selling concentrated fruit juices to UK and overseas buyers. This is the first year your firm will perform the audit. You are currently completing the planning work for the audit of trade
The accounts receivable — confirmation statistics working paper (index B-3) that appears over was prepared by an Audit Assistant Peter Porter, during the 20XI year audit of Western Water Ltd, a continuing audit client. The engagement supervisor is reviewing the working papers.RequiredDescribe the
State the main audit objectives for (1) purchases and payroll transactions and (2)creditors balances.
What is the sequence of functions normally associated with processing of purchase transactions? For each function, identify one control.
What are the major files and printed outputs of computer activities for processing purchase transactions?
For both of the functions pertaining to cash payment transactions, indicate two questions that may be used in preparing an internal control questionnaire for this transaction class.
For each of the six functions associated with processing payroll, identify one control.
What are some inherent risk factors that may affect purchase and payroll assertions?
Discuss why the principal risk associated with the audit of purchases and creditors is understatement.
What do you think are the three main assertions in the audit of creditors? Indicate the primary substantive procedures for those assertions.
Which of the following controls would be most effective in assuring that recorded purchases are free of material misstatements?(a) Purchase orders, goods received notes and suppliers’ invoices are independently matched in recording purchases.(b) Goods received notes require the signature of the
When goods are received, the receiving clerk should match the goods with the:(a) purchase order and the requisition form.(b) supplier’s invoice and the goods received note.(c) supplier’s shipping document and the purchase order.(d) goods received note and the supplier’s shipping
Internal control is strengthened when the quantity of merchandise ordered is omitted from the copy of the purchase order sent to the:(a) accounting department.(b) purchasing officer.(c) receiving department.(d) department that initiated the requisition.Choose the best answer.
An auditor wants to perform tests of control on an entity’s cash payment procedures.If the control procedures leave no audit trail of documentary evidence, the auditor will most likely test the procedures by:(a) inquiry and analytical procedures.(b) confirmation and observation.(c) observation
To ensure the completeness of purchases made during the year, the auditor should:(a) select a sample of transactions from the purchase ledger and vouch to related invoices.(b) perform a bank reconciliation.(c) select a sample of invoices received before the year-end and ensure that they are
Which of the following auditing procedures is best for identifying unrecorded trade creditors?(a) Investigating creditors recorded just before and after the balance sheet date to determine whether they are supported by goods received notes.(b) Reviewing cash disbursements recorded subsequent to the
The sampling unit in a test of controls pertaining to the existence of payroll transactions ordinarily is:(a) aclockcard.(b) agroup certificate.(c) the employee’s personnel record.(d) a payroll register entry.Choose the best answer.
The partner in charge of the audit of Sinfin Wholesale Ltd is concerned about the controls in the company’s computerised purchases system. In the purchases system, invoices and credit notes are posted to the computerised purchase ledger by the purchasing department, and the computer automatically
You are the audit senior for the audit of GG’s Ltd and have been given the audit file to review by your assistant. The balance date is 30 June 20X1 and the materiality for the client has been set at £200,000. You obtained the information listed below from your review of the audit file.• The
In 20X1, Giles Ltd purchased over £10 million of office equipment under its ‘special’ordering system, with individual orders ranging from £5,000 to £30,000. ‘Special’ orders entail low-volume items that have been included in an authorised user’s budget.Department heads include the
You are the audit manager performing the audit of Retry Ltd, a large manufacturer of retread tyres. You are currently performing a review of some of the work performed by the audit senior, Tim Spurling, on creditors. Background information and the related working paper are given below. In prior
State the audit objectives for stock account balances and related transactions.
What is the sequence of functions normally associated with control over the stock function? For each function, identify one control.
What are the inherent risk factors that may affect stock assertions?
What factors are involved in determining the acceptable level of detection risk for stock balances?
List the main procedures involved in the performance of a stock-take. Describe three of the most important controls over a stock-take.
State the tests that relate to both the existence and valuation assertions stocks.
For the auditor’s observation at a stock-taking, what steps should be performed?Why should the auditor take test counts?
What are the audit objectives for fixed asset transactions and balances?
Why does the audit of fixed assets generally take less time than the audit of current assets? Why is it audited using a predominantly substantive approach?
Discuss the procedures that would be useful in ensuring that all disposals of fixed assets have been recorded.
Your client runs a store selling beer and wine, and theft has been an ongoing problem.What is the key assertion that you would be concerned about?(a) Existence.(b) Valuation.(c) Completeness.(d) Rights and obligations.Choose the best answer.
The primary objective of an auditor’s observation of an entity’s stock-taking is to:(a) allow the auditor to supervise the conduct of the count to obtain assurance that stock quantities are reasonably accurate.(b) provide an appraisal of the quality of the merchandise on hand on the day of the
An entity maintains perpetual stock records in both quantities and value. If the assessed level of control risk is high, an auditor would probably:(a) insist that the entity performs physical counts of stock several times during the year.(b) apply gross profit tests to ascertain the reasonableness

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Modern Auditing 1st Edition Graham Cosserat - Solutions

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